Can telcos exploit TRAI's Net Neutrality loophole to offer free 4G?

Getting around Net Neutrality principles

Sharma said, “TRAI has not provided much clarity on how telcos will work on intranet-based data offerings. That said, the regulator clearly suggested in its recent tariff order that rules prohibiting differential pricing for data will not be applicable to Closed Electronic Communication Networks (CECN) or in other words, the intranet platforms of telcos.”

It is this oversight from TRAI that telecom companies may try to monetise.

He added, “Telcos will find it difficult to have differential pricing for data on their intranet offerings. However they could cherry-pick data/content and charge carriage fees from content providers/ecommerce players for providing them access on their intranet platforms. This would allow telcos subsidize subscriber data charges and offer data services at much lower tariffs, or may be free in some instances.”

Telecom companies will aggregate intranet with content around movies or sports and other content that will entice subscribers, said Sharma. “Such an approach may allow 4G entrants to ask for a fixed fee that is not directly linked to data usage, to target the medium/high average revenue per unit (ARPU) data users and churn subscribers from top incumbent telcos,” he added.

“A lot depends on the carriage fee. So far carriage fee can compensate for the costs and spectrum investments net impact on realisations may not be much. However, this approach may change the way data is monetised and telcos may need to build skills in content sourcing and packaging. It will also necessitate changes at the organisational level of incumbent telcos in order to align with new business models,” said the report.

Currently, the data model works by subscribers paying for data usage and if they intend to buy additional content such as movies they have to pay additional charges. The entrants into the 4G market may attempt to tweak the traditional model by providing more value to subscribers via aggregating movie and other entertainment/infotainment content on their intranet platform, said the report.

This will allow them to offer customers data virtually free and may allow the new entrants to quickly gain more market share.

“4G entrants may fare better than incumbents in the short run given their direct presence in the content space and they may be able to source content more cheaply from other content providers as well, given their bargaining power,” said Sharma.